Assessments

Typically, it will depend on your governing documents.
Realistically, it will also depend on the amount of the special assessment (per lot/unit).

If you have enough funds in the reserves to cover the cost but need to replace the reserves, you will likely get better results with a longer payback plan (or a longer payback option).

Regardless of the amount of time allotted, you will likely have those who simply don't have the funds readily available and will need additional time to pay. Payment plan options would be preferred here (with or without penalties). However, be prepared to lien and, perhaps foreclose on those who can't or won't pay.

One way to cover the cost is have the HOA take out a bank loan and the bank set up a payment plan for each owner. That is what one HOA (townhomes, 3-4 units per building) I know of did. The payment plans were pay within 30 days and no interest. You were then offered several plans upto 5 years. It created a lien on the home that had to be settled when the home sold. There cost was about $25K per unit.

The HOA got there money all at once and the necessary repairs were done within two years.

As George noted, it’s interesting how people buy houses and think they can go years and years and YEARS without anything wearing out or breaking down. These folks never thinking of saving for the day when they have no choice but to repair the roof, furnace, carpeting, etc., but will howl big time about assessments being “too high” to pay the piper! That’s probably the back story you’re wondering about.

This sounds like your president wants to impose some sort of special assessment, which usually can’t happen without homeowner approval (check your documents). Considering that the homeowners voted not to fully fund reserves, I suspect the response to a special assessment would be a big fat no. However, an end run around the documents isn’t a good idea either.

It would be better to hold a special homeowner’ meeting, aka “come to Jesus” fellowship, as it were, and tell people what’s at stake and reminding them of how they came to this point. Since most people have $6K to $12K laying around for a special assessment in one shot, the board should offer some sort of payment plan to at least come up with half the money within a year or two and the rest within 3-5 years. Once you have part of the money, have the roofing contractor determine which buildings need replacement sooner rather than later and work on those first, then do the rest within 5 years.

John suggested that you could also take out a bank loan and the bank set up payment plans for each owner. If homeowners don’t want a separate payment plan, the association board could say fine – the association will take out the loan, but to pay for it (remember loans also mean interest), routine expenses and fund reserves PROPERLY, assessments will be increased every year to the maximum amount allowed by the documents (e.g. 5% over the current year) for the next X number of years until we get past this. If anyone else has a suggestion, bring it on because one way or another, homeowners will have to pay for this (yes, they can always move, but what will they say when potential buyers ask about special assessments and why homeowners voted not to fully fund reserves in the first place?)

I didn't say the HOA should loan homeowners the money - I meant the HOA would obtain the loan as a non-profit corporation and then the budget (for the next 5-10 years) would be set to cover loan payments, routine expenses AND reserves. Homeowners ultimately have to pay for all this anyway as association members, so if they don't want to pay at least $6K on top of regular assessments, they have to accept that assessment increases are here to stay. Depending on how underfunded they are, these folks may not be able to avoid a special assessment (or two), even with an increase.

Once upon a time, our board kicked around the idea of getting a loan for something and we were told the bank looks at things like reserves, delinquencies, etc., along with the amount that comes in from assessments. We didn't have great figures for any of this stuff, so our chances of getting one were bleak at best or the interest rate would be out of this world, so we said no. Then we increased fees to bump up reserves and explained to everyone why this was necessary. People grumbled, but went along with it.

You're correct in trying to avoid loans, but this $2 million for roofing has to come from somewhere, so these homeowners need to understand that it might not have been necessary at all if they'd funded reserves properly from the start. Instead, they made the same mistakes we all do in HOA finances as well as our own - we think we have all the time in the world and put all of this off, or we figure we'll be gone by the time the shit rains down. It usually doesn't happen that way and we end up paying far more in the end.